XP Power Share Price Plunged 40.6% on Its First Outlook for FY24

The XP Power Ltd (LON: XPP) share price plunged 40.6% after providing its first outlook for the current fiscal year ending on 31 December 2024. The company's Board anticipates a revenue shortfall for the upcoming year, positioning the 2024 outlook considerably below the market's expectations. 

This forecast stems from recent trends in order intake and revenue performance, alongside discussions with clients, especially in the Healthcare and Industrial Technology sectors. These conversations have highlighted a temporary dip in demand and inventory adjustments, trends that are mirrored among the company's industry counterparts.

XP Power is a global leader in developing and manufacturing essential power control solutions for Industrial Technology, Healthcare, and Semiconductor Manufacturing Equipment sectors. 

As the year began, the expected downturn in the Semiconductor Manufacturing Equipment sector continued, aligning with cyclical patterns. However, improvement is expected as the year advances. A new development for 2024 is the projected slowdown in sales within the industrial technology and healthcare sectors, which is attributed mainly to changes in customer inventory levels.

Unlike the Semiconductor sector, these areas do not typically experience cyclical demand for XP Power, with the anticipated slowdown linked to clients reducing stock in response to shorter delivery times.

Despite the current downturn, there are signals of a potential rebound, particularly in 2025, with some customers already showing more positive engagement. The precise timing and pace of recovery remain uncertain, but an uptick in business is expected to be more pronounced in the latter half of 2024.

Regarding cost management, the company is progressing with previously announced savings measures and has identified further cost-reduction opportunities for implementation in the first quarter. These efforts aim to significantly reduce overhead costs while maintaining the company's ability to capitalise on future market recovery.

On the financial front, XP Power's cash flow towards the end of 2023 surpassed expectations, leading to a year-end net debt figure of £112.7 million. This trend is expected to continue into 2024, with projected net debt falling below earlier estimates.

Should the company's performance align with Board expectations, the net debt/EBITDA ratio by December 31, 2024, is anticipated to meet or be lower than 2.5x, well within the 3.5x covenant limit. The Group also continues to hold significant liquidity.

XP Power share price. 

The XP Power share price plunged 40.55% to trade at 893.0p from Thursday’s closing price of 1502.0p.